Living Off My Hump using the Savings Budget

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1

I am using the Savings Budget for a very short time now, but I think my situation might be slightly different. I retired a few months ago, and so my primary income source is savings and investments with some small supplemental income. I have a few questions that maybe you can help answer:

  1. I want to make sure that my accumulated savings (connected to Tiller), disbursements from investments, and a small amount of monthly income covers my budgeted expenses. What I think that means is that “Income” will usually be smaller than expenses, with the difference made up by supplementing from my savings. Is there a way to get the Budgeted amounts to balance between income and expense? Should I be looking at Budgeted at all, or just concentrating on Available?

  2. I have a “Buffer” expense category that currently represents cash in my bank accounts that has not been allocated to an expense category. Again, what I think needs to happen is that I should adjust the Buffer balance down to cover the gap between what is true income flowing in and my budgeted expenses for the month. How should I make those adjustments?

I’ve been using YNAB since 2018 using the same categories that I have set up here, so I have decent performance history (I’m pretty aware of areas where we tend to over- or under-spend). For reasons that I do not need to share, I am moving to Tiller and cutting YNAB free. My chief concern in doing so is draining more of my cash than the tool shows (likely through misuse, not system error). Thoughts?

2

I’ve been wondering about how to handle this as well. We’re currently spending more than we’re earning (with the difference coming out of savings), and I’m trying to use the Savings Budget to reign things in. Like you, I was thinking of using a category like your “Buffer” category that I could use to bring savings into the budget to cover overages until we get our spending in better order. Would love to hear how others deal with situations like @DMA and mine.

3

Thanks for the response! Good to know others have similar questions.
Most of the time we try to cover expense overages by shifting budgeted expense from other categories, like moving unspent from Transportation to Groceries from when my kids come over and drink all our wine. For anything chronic, we make a permanent adjustment to the budgeted amount for that category and find the money either in other categories or in increased burn from the buffer.

The tricky bit for me is figuring out how to move from month to month knowing that my “allocations” are not pushing me into the red - hence my question about how to handle that buffer amount.

4

Ok. I have been thinking about this a bit more and here is the pattern that I have settled into:

The set-up:
I have an expense category called Buffer that I use to accumulate income and allocate expenses.

  1. At the beginning of a month I decrement the savings in Buffer by the cumulative amount of budgeted expenses for the month.

  2. Whenever income arrives (which is somewhat sporadic, since I’m semi-retired now) I decrement the income category and “move” the money to Buffer. Note: I do not budget the income and I move it to Buffer as soon as it arrives.

  3. At the end of the month (after all transactions have cleared) I adjust the savings category for Buffer either down or up depending on if actuals are greater than or less than the budgeted amount. E.g. If I spend $200 more for the month than I planned, I decrement Buffer with S-200.00. That should keep the Buffer balance tied to my actual cash position.

I no longer make adjustments to cover small overages in various categories - I let the savings, or lack thereof, influence how I budget the new month. For serious overages I will hunt for available in other categories and shift (always savings, not budget) funds to the short category. If I cannot find the slush, then I will allocate from the Buffer.

The Up Side:

  • My Buffer is the guardrail - it should track my bank balance pretty closely.
  • It directly ties my budgeting to my cash availability - i.e. I have good visibility into how my monthly planned spend is using my cash reserves

The Down Side:

  • It reduces the usefulness of the Yearly Budget tab. Since I am no longer budgeting the income, the annual budget looks like it is under water.
  • It requires me to keep decent notes in the Budget Journal tab

I would be interested to hear from folks if you think I am missing anything, or have anything deeply wrong.

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